Capital Flows and Exchange Rates: Some Implications

Gordon Pepper
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Gordon Pepper: Department of Banking and Finance, City University Business School

Chapter 17 in Money, Credit and Asset Prices, 1994, pp 257-270 from Palgrave Macmillan

Abstract: Abstract This chapter is a reproduction of Monetary Bulletin no. 204, ‘Capital Flows and Exchange Rates’, circulated in October 1989, which was reproduced as a chapter in S. F. Frowen and D. Kath (eds.), Monetary Policy and Financial Innovation. The chapter gives further insight into the effect of capital markets becoming global in the 1980s. In particular it discusses how the dominant component of the balance of payments has tended to change over the years, from current to capital account, to flows of first shortterm capital and then long-term capital. It describes how foreign investors can react to a financial disequilibrium in a country more quickly than a domestic aggregate within the country, such as the level of savings, can alter. This is a possible explanation of the surprising dominance of foreign investors in the 1980s.

Keywords: Exchange Rate; Business Cycle; Central Bank; Current Account; Money Supply (search for similar items in EconPapers)
Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-37593-2_18

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DOI: 10.1057/9780230375932_18

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